The Real Estate (Regulation and Development) Act, 2016, commonly known as RERA, is a key legislation enacted by the Parliament of India to regulate the real estate sector and protect the interests of homebuyers. It seeks to bring transparency, accountability, and efficiency to the sector, which had long been plagued by delays, frauds, and irregularities. Let’s discuss why we needed such a legislation, and how the RERA Act proved helpful with its agenda.
Need of RERA Act
Given below are some pointers to reflect upon the need of the Real Estate (Regulation and Development) Act, 2016:
- Securing the Largest Investment Sector: Regulation of the real estate sector had been under discussion since 2013. This was because a number of real estate frauds had come into light. The RERA Act eventually came into being in 2016.
- Real Estate Statistics: Data shows that more than 77% of the total assets of an average Indian household are held in real estate, and it’s the single largest investment of an individual in his lifetime. Thus, securing such an interest has been all the way paramount.
- Creating Accountability: Before the RERA Act came into existence, the real estate and housing sector was largely unregulated, with the consequence that consumers were unable to hold builders and developers accountable for misdeeds.
- Inadequate Laws: The Consumer Protection Act of 1986 was inadequate to address the needs of homebuyers.
- Efficient Authority: RERA was introduced to ensure greater accountability towards consumers, to reduce frauds and delays, and to set up a fast-track dispute resolution mechanism.
Objectives of RERA Act 2016
- To establish a regulatory authority in each state and Union Territory, called as the Real Estate Regulatory Authority.
- To ensure transparency in project marketing and documentation.
- To protect the interests of consumers in the real estate sector.
- To regulate promoters, real estate agents, and developers.
- To provide a speedy dispute redressal mechanism through Real Estate Appellate Tribunals (REAT).
Key Provisions of Real Estate (Regulation and Development) Act, 2016
- Registration of Projects: All real estate projects (residential or commercial) with land area of over 500 sq. meters, or more than 8 units, must be registered with the respective State RERA.
- Project Escrow Account: Developers must deposit 70% of project funds in a separate account in a Scheduled Bank to ensure funds are used only for that specific project.
- Project Details Disclosure: Promoters must disclose all project details—land title, approvals, layout, timeline, and financials—on the State/UT RERA website.
- Timely Delivery: The Act requires that the Projects must be completed by the promised deadline. In case of delay, buyers are entitled to compensation or refund with interest.
- Penalties: Non-compliance with the RERA Act 2016 can lead to penalties, with imprisonment up to 3 years for promoters, and up to 1 year for agents and buyers in some cases. Fine may also be imposed.
- Regulation of Real Estate Agents: Agents involved in selling or marketing must also register with the respective RERA.
Applicability of RERA Act
The Real Estate (Regulation and Development) Act, 2016 applies to both residential and commercial projects. It covers promoters, real estate agents, as well as the allottees (buyers). It is enforced across States and Union Territories, with each establishing its own RERA Authority. At present, as per a 2023 report, 32 out of 36 States/UTs have setup Real Estate Regulatory Authority, and 28 of these 36 have setup the RERA Tribunal.
Registration of Real Estate Projects and Real Estate Agents
- The RERA Act enlists the registration policy of a real estate project and real estate agent and related provisions under Section 3.
- Sub-section(1) of Section 3 of the Act makes it mandatory for all real estate projects to register with RERA for launching a project to provide greater transparency in project marketing and execution.
- Projects without a completion certificate at the time of the Act’s commencement were required to be registered within 3 months.
- Each State RERA must approve or reject a registration application within 30 days. Upon successful registration, promoters receive registration number, login id and password.
- Failure to register can lead to a penalty up to 10% of the project. Further disobeying RERA’s directions may lead to up to 3 years of imprisonment or an extra 10% fine.
- Real estate agents must register before facilitating any property for sale. Agents get a single registration number per State/UT, to be quoted in all transactions.
- Unregistered or contravention of any of the provisions of Section 9 and section 10 will be liable to penalty of Rs.10,000/- payable till the default continues. Moreover total penalty for agents may reach up to 5% of the property cost.
RERA Registration Fees
The registration fees for RERA varies from State to State in India. Each State has its own fee structure based on their rules and regulations. RERA Fees are usually calculated based on type of project, total area, number of units, some states charges per square foot or per unit vise. The registration fee depends upon the size and the value of project, ranges from a few thousands to lakhs.
Penalties under RERA
For Buyers
| Offence | Penalty |
| Non-compliance with RERA | Penalty up to 5% of the approximate cost of the project. |
| Non-compliance with Appellate Tribunal | With Imprisonment for one year or with 10% of the approximate cost of the project, or both. |
For Promoters
| Offence | Penalty |
| Non-registration | 10% of the project cost. |
| Providing False Information | 5% of the project cost |
| Violations of the Law | With Imprisonment for three year or with 10% of the approximate cost of the project, or both. |
Applicable Penalty under RERA
| Offence | Penalty | Applicable section |
| Breach of terms for which registration has been sought.Registration secured through fraud or misrepresentation. | It amounts to cancellation of registration number of the agents | Section 9(7) |
| Violation of orders of Appellate Tribunal | Imprisonment upto one year or fine up to 10% of the unit sold | Section 66 |
| Violation of Section 9 and 10 of the RERA Act | Fine upto Rs.10, 000/- per day till the date of continues the default extending upto 5% of the unit sold. | Section 62 |
| Violation of orders of the RERA Authorities | Fine upto 5% of the unit sold | Section 65 |
Significance of RERA Act, 2016
- Boosts buyer confidence in the market.
- Reduces project delays and fraud.
- Improves governance and professionalism in real estate.
- Standardizes practices across developers and agents.
- Encourages institutional investment due to improved accountability.
Conclusion
The Real Estate (Regulation and Development) Act, 2016 has brought about a paradigm shift in the Indian real estate sector. By enforcing discipline, protecting buyers, and holding developers accountable, RERA has paved the way for a more trustworthy and investor-friendly real estate environment. While challenges in implementation remain in some States, the RERA Act 2016 has undeniably laid the foundation for a more organized and transparent real estate market in India.
The overview of RERA Act, 2016 is brought by our intern, Ms Nandini Patel. She has been assisting the team in bringing informational legal blogs.
